2 groups back Gov. Kasich's sales tax expansion, but not income tax cut

3/6/2013

COLUMBUS — Gov. John Kasich’s proposal to greatly expand Ohio’s sales tax base to include a litany of previously untaxed services won approval Tuesday from an unlikely pair of left-leaning groups — but only if the money isn’t used to fund his income tax cut.

One Ohio Now, a group representing largely governmental services, wants to use the nearly $1.8 billion to be generated by the base expansion and the offsetting half-penny cut in the sales tax rate to boost support for local governments and schools that took a big hit in the current budget.

The Cleveland-based Center for Community Solutions called the expansion to services long overdue, but it urged the state to further lower the sales tax rate, currently at 5.5 percent, to reduce the dollar gain or even make the package revenue neutral.

Neither group is typically a fan of Republican tax policies. And both dislike the across-the-board income tax cut that is inextricably linked to the sales tax plan. The governor doesn’t talk about the sales tax package without mentioning the income tax cut, the latter supposedly making the former more politically palatable.

It was clear Tuesday that Republicans and Democrats alike on the House Ways and Means Subcommittee have problems with the sales tax plan as it stands alone. It remains to be seen whether it will stand or if lawmakers will water it down to the point that it undermines Mr. Kasich’s income tax cut.

Today the subcommittee opens testimony to opponents of the plan and the line to testify could be a long one. The proposal calls for taxing for the first time legal services, cable television, magazine subscriptions, coin-operated laundries, architects, accounting, investment counseling, barbers, pet groomers, newspaper and broadcast advertising, and numerous other services.

The subcommittee’s chairman, Rep. Jeff McClain (R., Upper Sandusky), whose district includes a chunk of western Seneca County, compared the entire tax package to the children’s game Kerplunk, in which players remove one stick at a time until a entire container of marbles collapses.

“This whole thing is intertwined,” he said.

Gavin DeVore Leonard, state director of One Ohio Now, conceded that his group’s position amounts to a net tax increase, not the overall $1.4 billion tax cut that Mr. Kasich envisions when his income tax proposal is factored in.

“In the big picture, the balance is off,” Mr. Leonard said. “In the big picture, we don’t have enough revenue.”

Jon Honeck, Community Solutions’ director of public policy, suggested Ohio should set the new sales tax rate at 4.5 cents on the dollar, a full penny below the current statewide rate and half a penny below what Mr. Kasich proposes.

That would generate $634 million in revenue for the state. A rate of 4.25 percent would be roughly revenue neutral, Mr. Honeck said.

Contact Jim Provance at: jprovance@theblade.com, or 614-221-0496.